Govt Invites New Applications For Semiconductor Fabs Manufacturing Unit Under 'Modified' Programme

The government's decision to revise the semiconductor PLI scheme came after reports emerged that the joint venture between Vedanta Resources and Foxconn would be denied incentives

The Centre has decided to invite new applications for setting up semiconductor fabs and display fabs in India from June 01, 2023, under the Modified Semicon India Programme. According to the official statement, the applications will be received by India Semiconductor Mission, the designated nodal agency entrusted with the responsibility of implementing the Modified Semicon India Programme for the development of the semiconductors and display manufacturing ecosystem in India.

The move came after it was reported that the government is set to deny the incentive to a joint venture (JV) between Vedanta Resources and Foxconn under the scheme which was granted on the condition of finding a technology partner or license manufacturing-grade technology for the fabrication plant. According to a Bloomberg report, the government has decided to deny incentives for Vedanta-Foxconn’s proposed 28-nanometer semiconductor manufacturing facility as the JV failed to find a technology partner in the nine months after it first announced plans.

Earlier, clarifying on the Bloomberg report, MoS IT on Twitter said, “ISM (India Semiconductor Mission) @Semicon_India is today announcing that it will start accepting and considering new applications for fabs from new & existing applicants.” 

Chandrasekhar said that the first window for more expensive 28 nm fabs was kept open for 45 days in January 2022 and it received three applications that were evaluated by ISM and its advisory group. However, the minister did not disclose if any of these applications have been able to fulfill the criteria to claim incentives under the $10 billion production-linked incentive scheme for semiconductor manufacturing.

“Strategy now is also encouraging mature nodes of >40nm - current n new players may apply afresh in various nodes that they hv technology for. It is expected that some of current applicants will reapply n (sic) new fresh investors will also apply,” Chandrasekhar added.  

The report added that Vedanta and Foxconn JV may file a new application to meet the government’s criteria for approval, the delay in receiving incentives worth 50 per cent of the development costs of the fabrication unit is considered to be a setback.

Initially, the government's semiconductor mission primarily aimed to promote the production of semiconductors with smaller nodes. Under this initiative, fabs producing semiconductors nodes ranging from 45 nm to 65 nm were entitled to the lowest incentive of 30 per cent. However, in September 2022, the government revised the semiconductor PLI scheme, offering a uniform 50 per cent incentive of the project costs for all semiconductor nodes. This revised approach replaced the previous structure, which provided incentives of 30, 40, and 50 per cent for different nodes.

According to the statement by the Ministry of Electronics & IT, "Under the Modified Programme, fiscal incentive of 50 per cent of the project cost is available to companies/consortia/ joint ventures for setting up of Semiconductor Fabs in India of any node (including mature nodes). Similarly, fiscal incentive of 50 per cent of the project cost is available for setting up of Display Fabs of specified technologies in India."

The application window for “Modified Scheme for setting up of Compound Semiconductors/Silicon Photonics/Sensors Fab/Discrete Semiconductors Fab and Semiconductor ATMP/OSAT facilities in India” is open till December 2024. The application window of the Design Linked Incentive Scheme is also open till December 2024. To date 26 applications have been received under DLI Scheme and five applications have been granted approval.

The government launched the Semicon India Programme in December 2021 with an outlay of Rs 76,000 crore for the development of the semiconductors and display manufacturing ecosystem in India. All applicants who had applied under the scheme for setting up of Semiconductor Fabs and Scheme for setting up of Display Fab (earlier schemes) are allowed to submit applications under Modified Scheme for setting up of Semiconductor Fabs and Modified Scheme for setting up of Display Fabs after incorporating suitable modification in their proposals.